EUR/USD Price Forecast: Can it break 1.1900? Here’s what could spark the move
- EUR/USD adds to recent gains and surpasses the 1.1800 hurdle on Tuesday.
- The US Dollar recedes to multi-day lows following Chair Powell’s speech.
- Chief Powell reiterated the Fed’s data-dependent stance when it comes to rates.
The Euro (EUR) built on Monday’s gains, with EUR/USD climbing back above the 1.1800 handle on Tuesday to notch fresh three-day highs. The move came as the US Dollar (USD) lost momentum, pressured by falling US yields and a softer tone in the US Dollar Index (DXY), which edged closer to the 97.00 support area.
The Fed is still finding its footing
The Federal Reserve cut rates by 25 basis points on September 17, citing a cooling labour market but acknowledging that inflation remains “somewhat elevated”. The latest dot plot sketched out another 50 basis points of easing before year-end, smaller trims through 2026 and 2027, and a median 2025 policy rate of 3.6%. Growth was revised a touch higher to 1.6%, while unemployment was left at 4.5%, and inflation projections held steady.
The decision wasn’t unanimous. Incoming governor Stephen Miran pushed for a deeper 50 basis points cut. Chair Jerome Powell, at his press conference, pointed to slower job creation, softer consumer spending, and inflation running at 2.7% on the headline PCE and 2.9% on the core. He argued tariffs were pushing prices higher but noted that services inflation was easing. Overall, he framed the risks as “more balanced,” signalling the Fed is edging closer to neutral and not inclined toward sharper cuts.
Speaking again on Tuesday at the Greater Providence Chamber of Commerce in Rhode Island, Powell admitted the Fed faces a “challenging situation”: the risk that inflation could flare up again just as weak job growth raises fresh concerns about the labour market.
ECB comfortable holding steady
The European Central Bank (ECB) earlier this month kept rates unchanged, sticking with its meeting-by-meeting approach. Policymakers said inflation is broadly on track to meet the 2% medium-term target, with core seen averaging 2.4% in 2025, before easing to 1.9% in 2026 and 1.8% in 2027.
President Christine Lagarde said the ECB is in a “good place” and that risks are more evenly balanced. She stressed, however, that any move on rates will depend entirely on incoming data.
Trade moves cool the temperature
Trade tensions have eased a little. Washington and Beijing agreed to a 90-day extension of their truce, though tariffs remain high—the US still levies a 30% tax on Chinese goods, while China applies a 10% tariff on US imports.
Washington also struck a deal with Brussels: the EU cut tariffs on US industrial goods and opened the door wider for American farm and seafood exports. In return, the US slapped a 15% tariff on most EU imports. Auto tariffs remain a live issue, pending further talks.
Traders scale back Euro bets
Speculative demand for the Euro has cooled. Commodity Futures Trading Commission (CFTC) data for the week ending (September 16) showed non-commercial net longs dropping to a five-week low near 117.8K contracts. Institutional traders pared back net shorts to around 167.4K, while open interest fell to roughly 855.5K, pointing to fading convictions on both sides.
Technical picture
EUR/USD has started the week on the front foot, pushing to sustain a break above 1.1800. If momentum holds, a move toward yearly peaks above 1.1900 is possible. The key upside marker sits at the 2025 ceiling of 1.1918 (September 17). A clear break would open the way to the psychological 1.2000 level.
On the downside, initial support comes in at the 55-day Simple Moving Average (SMA) at 1.1673, followed by the weekly low at 1.1574 (August 27) and the August trough at 1.1391 (August 1).
Signs from momentum indicators are good, but not quite rock solid yet: The Relative Strength Index (RSI) is close to 58, which means that there are a lot of buyers in the market. The Average Directional Index (ADX), on the other hand, is just over 17, which means that the overall trend doesn't have a lot of strength behind it yet.
EUR/USD daily chart
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So, where does that leave EUR/USD?
The pair may definitely go up in the near term. But traders will probably need a greater spark for a true breakout. This might be a dovish change from the Fed, investors moving out of US assets, a breakthrough in trade, or stronger signs that the ECB is willing to remain on hold for longer.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
